The Alternative Investment Fund Managers Directive (AIFMD) comes into force on 22 July, 2013 and will affect managers falling within the definition of "AIFM" under the AIFMD which:

(a) are based in the EU and manage AIFs (wherever those AIFs are situated); or

(b) are based outside the EU but manage EU AIFs; or

(c) are based outside the EU but market their non-EU AIFs (including AIFs domiciled in the British Virgin Islands to investors in the EU.

A number of non-EU based managers of AIFs domiciled in the British Virgin Islands currently market into the EU using existing regimes in place in the relevant EU countries. One of the initial consequences of the AIFMD coming into force is that in order for these practices to continue after 22 July, 2013, certain preconditions need to be met.

One of the key conditions is for there to be a cooperation agreement in place between both the British Virgin Islands Financial Services Commission (FSC) and each of the relevant EU securities regulators where marketing of the non-EU AIFs takes place.

The ESMA Announcement

Steven Maijoor, the ESMA Chair, made the following announcement:

"The approval by EU securities regulators of these cooperation arrangements is a significant step towards the successful implementation of the supervision of alternative investment funds by the July 2013 deadline, and their negotiation is a key achievement for ESMA in its coordinating role for EU securities markets. The agreements set high standards for cooperation on the supervision of cross-border alternative funds, thereby strengthening investor protection and the global consistency of supervision."

ESMA has announced that the key elements of the cooperation arrangements are:

• EU and non-EU authorities will be able to supervise fund managers that operate on a cross-border basis both within the EU and outside;

• the cooperation between authorities includes the exchange of information, cross-border on-site visits and assistance in the enforcement of the respective laws;

• EU securities regulators will be able to share relevant information received from non-EU authorities with other EU authorities, ESMA and the European Systemic Risk Board, provided appropriate safeguards apply;

• The existence of cooperation arrangements between the EU and non-EU authorities is a precondition of the AIFMD for allowing managers based outside the EU to access EU markets or perform fund management by delegation from EU managers; and

• The cooperation arrangements are applicable from 22 July, 2013 and enable cross-border management and marketing to professional investors of alternative investment funds.

Harneys' View

The news from ESMA is a very positive and significant step towards the British Virgin Islands ensuring that they are ready to meet all of the initial requirements necessary to ensure that AIFs based in the jurisdiction are able to be marketed within the EU region from 22 July, 2013. As a result of our very close connections with the FSC, we are acutely aware of how tirelessly they has been assisting ESMA with this process and thank them for their hard work and diligence in this matter.